In this letter opinion, the Court of Chancery denied plaintiff’s request for books and records pursuant 8 Del. C. § 220. The stockholder plaintiff sought to investigate alleged wrongdoing by Hewlett-Packard Co. (“HP” or the “Company”) and its officers and directors in connection with the Company’s acquisition of Autonomy Corporation plc (“Autonomy”). Without deciding whether the plaintiff had a credible basis for requesting the documents sought, the Court concluded that HP had already provided him all documents necessary and essential to his stated purposes.
In August 2011, HP announced that it planned to acquire Autonomy for $10.2 billion, an acquisition it later completed. In late 2012, HP disclosed that it had taken an $8.8 billion goodwill impairment charge to reflect accounting improprieties at Autonomy that had occurred prior to its acquisition. Those improprieties became known to HP after the acquisition. Because HP was the victim of the fraud, it requested that various government authorities, including the DOJ, SEC, and the U.K.’s Serious Fraud Office (“SFO”), open investigations into Autonomy’s pre-acquisition accounting procedures. In December 2012, the stockholder plaintiff made a books and records demand on the Company, “requesting documents in eighteen categories, for the purported purposes of ‘1. investigating possible wrongdoing, mismanagement, or violations of law by the Board and the company’s senior officers; 2. further communication with the Board regarding the issues set forth above; and 3. determining whether the Board and the Company’s senior officers are independent and/or disinterested and whether they have acted in good faith.’” In response to plaintiff’s demand, HP produced 2,668 pages of documents responsive to 7 of the 18 categories, as well as a privilege log, but declined to produce an additional 750,000 pages of documents relating to the ongoing government investigations. The plaintiff thereafter filed a complaint in the Court of Chancery requesting production of all documents given to the DOJ, SEC, and SFO.
As a preliminary matter, the Court considered HP’s argument that the plaintiff lacked a proper purpose because he merely served as “a passive conduit” for his counsel. HP had pointed to, among other things, evidence that the plaintiff had merely responded to a press release from counsel and then affixed his signature to an already drafted Section 220 demand. HP also noted that the plaintiff previously served as an “inactive participant” in another, similar lawsuit. The Court found that the Company did not point to any other purpose the plaintiff might have for his request and that his testimony demonstrated he was well informed about HP’s management and interested in protecting his investment.
The Court, however, held that it need not decide the ultimate issue of whether the plaintiff had a credible basis for the inspection. Instead, the Court found that the plaintiff had “already received all documents necessary and essential to the satisfaction of his stated purposes.” The remaining categories of documents related to the investigation of Autonomy’s pre-acquisition conduct, not HP’s conduct. Because those documents could not uncover evidence of the HP board’s lack of oversight “at a time when Autonomy—the focus of the investigation—was still a separate entity, documents relating to those investigations cannot be necessary and essential to investigating” any suspected wrongdoing committed by HP’s officers or directors. Moreover, the Court found that plaintiff had admitted in testimony that the additional documents he sought reflected an impermissible “fishing expedition.”
For the foregoing reasons, the Court denied plaintiff’s request for books and records pursuant to 8 Del. C. § 220.
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